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Caracas Bitcoin Conference Offers Very Different Revolution

EspañolOn Friday, early adopters, investors, and cryptocurrency lovers gathered at the Impact Caracas Hub — an organization that fosters entrepreneurship in Venezuela — to learn more about bitcoin. The conference offered a glimmer of something different for Venezuela, where extreme economic controls have suffocated innovation and free exchange, particularly with regard to currencies.

The keynote, two-hour lecture was led by Gerardo Mogollón, who described the cryptocurrency as a new “monetary, technological experience.”

“Living in a country like ours generally distracts us from global events as important as this one. Bitcoin can change the global history of payments, and just because we are living in a constant economic and political crisis, we can’t lose sight of what’s going on under our noses,” Mogollón explained.

In front of approximately 25 attendees, the university professor began with a brief summary of the history of inflation and currency devaluation. Going right back to the first case of fiscal deficit in Athens economic policy patterns throughout history appear unavoidable. From Emperor Diocletian’s edict on maximum prices (301 AD) to curb inflation with price controls to Hugo Chávez’s Fair Price Law (2011), he contends, rulers have not learned basic economic truths, even after 2,000 years.

In both cases the result was the same: price controls only generated shortages and a more rapid currency depreciation.

The history of inflation is simple, explains Mogollón: first, there’s a sovereign state with a healthy economic system, backed by gold and silver reserves. Society grows, and governments increase public spending to a point where they start printing unbacked, fiat currency to finance their expenses. The currency depreciates, and inflation rises (a diminished purchasing power of the currency).

After World War II and the Bretton Woods Agreement, each participant country adopted a monetary policy that maintained exchange rates tied to the US dollar, backed by gold reserves. However, this strategy proved unsustainable. Less than three decades later, in 1971, US President Richard Nixon reneged on the agreement to redeem dollars with gold.

In 1944, the price of an ounce of gold was US$35, but it has risen to $1,250. Since 1971 alone, the US dollar has lost 85 percent of its value to inflation. Mogollón believes the consequences of such monetary expansion are eventual economic chaos and severe economic downturn.

The guest speaker then introduced bitcoin as a software-based payment system, an opportunity to protect one’s assets from inflation and even out-of-control regulation. The total bitcoin supply is capped at 21 million, so its inherent scarcity fosters its high value and protects it from manipulation. Since it doesn’t depend on any monetary authority, central bank, or government, the decentralized virtual currency offers users something that other currencies can’t: fiscal discipline.

In March 2013, each bitcoin had a value US$20, and then in November it reached $1,163. At that time, the demand for bitcoin became abundantly clear, and that it was here to stay.

Even though bitcoin offers numerous benefits, those in attendance wrestled with its many vulnerabilities and shortcomings: the need for alternative security mechanisms, a lack of monitoring for access from suspicious IP addresses, improved customer service for new users, as well as communication channels to better network users. For ease and security, Mogollón recommended several bitcoin trading platforms and digital wallets, along with the most affordable and profitable options for bitcoin mining.

The conference also featured insightful perspectives from Sebastián Serrano, founder and CEO of the Argentina-based payment processor BitPagos. Serrano even made a live demonstration of a Bitcoin transaction to better illustrate the simplicity and convenience of the cryptocurrency.

One of the main misconceptions and deterrents towards the use of bitcoin is that the digital currency is only available with US dollars. Venezuela’s exchange controls then become an automatic obstacle for potential bitcoin users. But this is not necessarily true; Venezuelans could easily offer their services and charge bitcoins instead of bolívares, having their profits secured in the cryptocurrency, and therefore, protected from the nation’s rampant inflation.

One of the attendees, Gabriel Pérez, a young engineer, came all the way from Barquisimeto to hear the conference. Pérez is also a bitcoin miner, and he spoke with the PanAm Post about his experience with this digital currency in Venezuela.

“About a year ago, I first learned about bitcoin, and digital currencies. I heard of it through a friend [and eventually] got hooked on it. Some time later, he convinced me to participate, and now we dedicate 20 computers and some ASIC cards to Bitcoin mining. We also trade with bitcoins, and have two mining pools in our homes, one in Barquisimeto and another one in San Felipe. Our plan is to grow these mining pools until they become large enough so that each one of them can hold up 30 to 50 miners.”

When asked about the likelihood of a bitcoin revolution in Venezuela, Pérez said “Venezuela is known for its youth, and its interest in modern technology. This opens up a big window for an eventual adoption of bitcoin. However, bitcoin, and digital currencies in general, are a complicated topic for the general audience. Currently, they are known as a very technical matter, and only people tied to the computing industry understand them.”

In this regard, Pérez believes that an information campaign in universities, financial organizations, and companies can help to inform more about the currency: “I believe bitcoin will change the global financial order, and Venezuelan entrepreneurs and businesses can also hop on the wave, if they are open to innovation.”